Service delivery warning: Residents owe most of municipalities’ R347bn debt bill

National Treasury has warned that municipalities could collapse if they do not increase revenue collection, revealing that the country’s local governments are owed an aggregate of R347.6 billion.

Its third-quarter local government revenue and expenditure report was released this week, covering the period to the end of March.

It found that aggregate municipal consumer debts were up by R9.4 billion from the last quarter. A total amount of R8.3 billion, or 2.4%, was written off as bad debt.

Households owe the most

Up to 73% or R253.6 billion was owed by residents and households.

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“Of concern is outstanding creditors more than 30 days relating to bulk electricity and water, trade creditors and other creditors,” Treasury added.

Municipalities are not collecting enough

The report noted that while municipalities on average aim for around 83% collection rate, in reality, it was around 61.5%.

It said this has the potential to destabilise and financially collapse municipalities.

“The underperformance of actual collections against billed revenue holds a significant risk for the liquidity position of most municipalities as the planned expenditure is based on a higher performance level.”

Many municipalities have launched campaigns to collect outstanding debt. City of Tshwane officials recently took to the streets to audit, warn and cut non-payers.

Finance MMC Jacqui Uys said 1 174 electricity meters were audited between 29 April and 5 May, and 172 were found to have been bridged.

“A total of R4.7 million worth of fines were issued,” she said.

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Uys said the city’s Ya Tima campaign was continuing to disconnect defaulting residents, businesses and state institutions.

Local governments under-spending on infrastructure

Treasury said poor revenue collection and under-spending on infrastructure could affect service delivery.

Municipalities were given infrastructure grants, but these were not being used.

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“This is a concern because slow performance may eventually lead to unspent conditional grants revert to the National Revenue Fund (NRF).

“The surrendering of unspent conditional grants to the NRF has negative consequences for the communities that must receive the services linked to the infrastructure to be built.”